Wealthy political donors may find themselves owing back taxes to the IRS, which has indicated a willingness to enforce a long forgotten rule on taxing large contributions to certain types of groups involved in election campaigns.

 

IRS officials have reportedly sent five letters to donors, whose identities have not been disclosed, informing them that substantial donations made last year could be subject to a 35% gift tax.

 

Speculation has focused on Republican supporters David and Charles Koch and Democrat George Soros as being possible targets of the new IRS effort. Koch and Soros are prominent examples of deep-pocketed players who have given generously to advocacy groups classified as 501(c)4 under the tax code. These groups include Crossroads GPS, which backed conservatives in the 2010 election, and Priorities USA Action, a pro-Obama organization.

 

Some politicos have questioned the timing of the IRS move and whether the agency is trying to send a message to curtail large donations in the 2012 campaign.

 

“There are a whole heck of a lot of people misusing (c)(4) groups as a means of getting around campaign finance regulations, and we lack a coherent system of laws to deal with that,” Donald B. Tobin, a legal expert on campaign finance and tax laws at the Moritz College of Law at Ohio State University, told The New York Times. “Now here’s a stick, frankly, that says there are consequences for doing that.”

 

An IRS spokesperson said the letters were initiated by employees of the IRS Estate and Gift Tax team, and that the Obama White House had nothing to do with it.

-Noel Brinkerhoff

 

I.R.S. Moves to Tax Gifts to Groups Active in Politics (by Stephanie Strom, New York Times)

IRS Gift Tax Move Could Hit New Anonymous Groups (by Ben Smith, Politico)

Potential Gift Tax Liability for Contributions to 501(c)(4)s (MS&K)